Questions of Fact Send COBRA Case to Trial

September 3, 2004 (PLANSPONSOR.com) - Questions
surrounding whether or not an employee received proper COBRA
notification demands a former worker's case against his
former employer and the health plan's third-party
administrator (TPA) go to trial.

In dismissing the
employer and TPA’s move for summary judgment, a judge in
the US District Court of the Northern District of
California found the claims against the employer could not
be resolved without a trial since there were questions of
fact as to whether or not the employee was provided with
proper COBRA notice.
Further, the outcome of the employee’s claim that his
coverage had been wrongfully terminated depended on whether
a proper COBRA election notice had been delivered,
according to an EBIA report.

Additionally, the court dismissed the case against
the TPA, ruling the TPA was not an Employee Retirement
Income Security Act (ERISA) fiduciary in this
case.

Case Details

In the case, the employee claimed that he was not
notified of his COBRA rights at the time of his
layoff.
Several months after he was laid he, the ex-employee
contacted the TPA to ask about COBRA and was then allowed
to elect coverage.
However, he also received an invoice for the period that
had elapsed since his layoff.
The employee paid the amount, but under protest.

The next month the employee did not make the premium
payment until after the end of the grace period and
subsequently, his coverage was terminated.
Following the COBRA termination, the employee filed
suit for failure to provide notice of his COBRA rights and
for wrongful termination of his health coverage.

Ruling

The employer argued that the TPA had sent a timely
COBRA election notice to the employee’s last-known address,
yet the employee contended that he had given the employer a
more recent address.
Thus, the former workers contended he should not
have been required to pay retroactive premiums and that his
payment should have been applied to cover premiums for
future months, with the result that his coverage should not
have been terminated. The court noted that the employer had
not established that it could require retroactive premiums
if it had failed to notify the employee of his COBRA
rights, according to the EBIA report.

However, if the employer had provided the employee
with a proper COBRA election notice, then the employer
would not have been obligated to allow the employee to join
the plan later, and its decisions to require retroactive
premiums and to terminate his coverage for nonpayment of
premiums would have been appropriate, the court
said.
Thus, proper resolution of the case necessitates the
need for a trial